Question
A company has ₹10 lakh in equity and ₹10 lakh in 10%
debt. EBIT is ₹4 lakh and tax rate is 30%. What is the financial leverage?Solution
Financial Leverage = EBIT / EBT EBT = EBIT – Interest = ₹4,00,000 – ₹1,00,000 = ₹3,00,000 FL = ₹4,00,000 / ₹3,00,000 = 1.33
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